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Monthly Archives: March 2015

In our last post, we looked forward to what may be the become the pivotal domestic question of the upcoming 2016 election: What do we do to fix income inequality?

In these early months of 2015, there is growing evidence that job growth is finally beginning to be accompanied by wage gains, as well. This raises the question: Is wage growth the savior to remedy income inequality?

Increasing the size of the pie would seem to provide a pivotal solution: everyone now can get a bigger piece. But what happens if the larger pie is distributed even more in the direction of those who already have the largest slices?

An Alternative View

Our view is that growing the pie is an integral part of the answer – but likely does not go all the way to fixing the still widening gap between the haves and have-nots globally – especially in the U.S.A. Is is time to pay attention not only to the overall size of the economic pie – but also to the size of the slice each of us gets? Maybe so.

Two suggestions for consideration:

1. Nurture resurgent economic growth – of the right kind. The right kind of growth is that which puts more after tax dollars back in the hands of every American – with mid-to-lower income workers getting a getting a larger (not smaller) share of the economic pie. And which increases the productive capacity of the U.S. economy to support a better quality of life for rich, poor, and middle class.

2. Increase the minimum wage – by a lot. Based on American productivity gains, a fair share compensation to minimum wage workers would be in the range of $18-$19 per hour – an approximate $11 per hour gain above the current federal minimum. Make the adjustment in bite-sized increments over the next 11 years – as a $1 increase each year. In the 12th year, make an adjustment for CPI changes that have accrued over the prior 11 years to reach full parity.

A Bit of Background

As a first take, this might seem like a jaw-dropping flight of fancy. But consider the stats.

To get back to where America was in the 1960s (in terms of buying power), the U.S. Department of Labor has estimated that the minimum wage today would need to be about $11 per hour – more than 50 % above the current federal minimum of $7.25.

The Obama Administration has proposed gradually increasing the current federal minimum wage to $10.10 per hour.

The Economic Policy Institute (EPI) has estimated that 16.7 million American workers would be directly benefited by the Obama-proposed increase. Nearly 28 million would be directly and indirectly affected as a result of the ripple effect, also benefiting workers currently paid at just above minimum wage.

While a new floor of $11 per hour is certainly justified (much less $10.10) in terms of changed purchasing power, an even higher wage gain is supportable if wages are to fully reflect productivity gains in the U.S. economy since 1968 – the peak year to date for minimum wage purchasing power. In effect, productivity growth since then could support as much as an $11 per hour gain – to about $18.25 per hour.

A Proposal for Conservatives?

There is great debate about whether or to what extent a higher wage minimum might result in fewer jobs for entry-level and unskilled workers. More than doubling the minimum wage would undoubtedly spur greater labor-saving productivity enhancements while also bringing workers sidelined by unemployment, welfare and early retirement back into the labor market.

Replacing U.S. human capital with out-sourced, computer and robotic equivalents already represents a seemingly unstoppable driving market force. Aggressively increasing the wage minimum merely accelerates the time frame for this unavoidable day of reckoning.

As a global community, it is time to address the value of a human touch vis-a-vis an impersonal, robotized future. A new order of low-wage leisure versus productive endeavor. This is the type of values discussion that should productively engage both liberals and conservatives – as well as those in-between.

There also is an upside that those of a more conservative persuasion might embrace. Outcomes like greater buying power from more consumers with disposable income (with greater marginal propensity to consume, as well). Reduced dependence on public assistance, greater incentive for workforce skills upgrading, for civil conduct, and for bolstering the great American Puritan work ethic.

So, What Would Jesus Say?

The frustrating thing about Jesus is that he does not come across as an economic ideologue. Not a feudalist or socialist. Nor an advocate for either market or state capitalism. This is a man who values human and kingdom outcomes above philosophical principles. A friend of rich and poor alike – of haves and have-nots.

Second only to his command to love God is the imperative to love your neighbor as yourself. And then there is Jesus’ observation that the laborer is worthy of his (or her) wages.

Global or Kingdom Economics?

Even if proposals for increasing the minimum wage made no economic sense (a proposition with which we do not agree), would there still be a higher and greater calling for proceeding? Does a fair and living wage for all workers make sense even if American or global GDP were to temporarily suffer?

In short, is this a case where the economy of God’s kingdom trumps global economics? Maybe so.